Employer's Guide to Unemployment Insurance Tax in South Carolina

Everything employers need to know about paying unemployment insurance taxes in South Carolina.

If your small business has employees working in South Carolina, you’ll need to pay South Carolina unemployment insurance (UI) tax. The UI tax funds unemployment compensation programs for eligible employees. In South Carolina, state UI tax is just one of several taxes that employers must pay. Other important employer taxes, not covered here, include federal UI tax, and state and federal withholding taxes.

Different states have different rules and rates for UI taxes. Here are the basic rules for South Carolina’s UI tax.

Register With the Department of Employment and Workforce

As a South Carolina employer, your small business must establish an employer account with the state, and then have South Carolina’s Department of Employment of Workforce (DEW) determine if you are liable for UI taxes. Most businesses with employees are liable. There are two different methods for handling this process: online or on paper.

To handle things online, begin by completing the UI Registration (UCE 151) at the South Carolina Business One Stop (SCBOS). Based on the information you supply, DEW will review your application to determine if you are liable for UI tax contributions. If liable, you will receive your employer account number and tax liability information by mail.

To handle the process on paper, you must file a form directly with DEW to get a UI tax liability determination for your business. Use Form UCE-151, Employer Status Report Registration Form. Blank copies of this form are available for download from the DEW website. Print out the form, complete it, and then submit it by mail.

There is no fee to register your business with DEW.

Note: To establish an employer tax account, you’ll need a federal employer identification number (EIN). You can apply for an EIN at IRS.gov. Generally, if you apply online, you will receive your EIN immediately.

Rules for UI Tax Liability

As a for-profit employer in South Carolina, you generally are liable for state UI taxes as soon as you meet any of the following conditions:

  • you pay $1,500 or more in wages in any calendar quarter
  • you have at least one employee during any 20 weeks in a calendar year
  • you acquire all or part of a business that was an employer subject to UI taxes at the time of the acquisition, or
  • you are liable under the Federal Unemployment Tax Act (FUTA) and have employees in South Carolina.

The first three of these conditions are effectively the same as rules that apply for liability under FUTA. Therefore, if your business is liable under FUTA, it’s likely also liable under South Carolina’s UI laws, and vice versa. Different rules, not covered here, apply to agricultural (farm) workers, domestic (in-home) workers, and employees of some (but not all) non-profit organizations.

One piece of good news is that state UI tax payments generally can be credited against your FUTA taxes.

Wage Base and Tax Rates

UI tax is paid on each employee’s wages up to a maximum annual amount. That amount, known as the taxable wage base, is subject to change. It recently was increased from $12,000 to $14,000.

The state UI tax rate for new employers, also known as the standard beginning tax rate, also can change from one year to the next. Recently, it has been slightly decreasing each year, and has ranged from around 2.0% down to around 1.4%. The rate usually applies for at least your first 12 months as an employer. Established employers are subject to a lower or higher rate than new employers depending on an “experience rating.” This means, among other things, whether your business has ever had any employees who made claims for state unemployment benefits. As an experience-rated employer, the DEW should mail you an annual Notice of Contribution Rate Form telling you your UI tax rate for the new year.

For recent historical information on tax rates, check the rate tables on DEW’s information webpage for employers.

File Quarterly UI Tax Reports and Payments

In South Carolina, UI tax reports and payments are due by the last day of the month following the close of each calendar quarter. In other words:

Quarter Covered

Due On or Before

1st – January, February, March

April 30

2nd – April, May, June

July 31

3rd – July, August, September

October 31

4th – October, November, December

January 31

Smaller employers can file reports and payments online or on paper. Larger employers must file reports electronically using magnetic media (magnetic tape, diskette, etc.). To file online, you can use either the SCBOS or the South Carolina Automated Tax System. DEW encourages all small businesses to file online. If you intend to file on paper, you must request a pre-printed Form UCE-120, Quarterly Contribution and Wage Report, for each quarter that you do not file online. If you file reports online using SCBOS, then the system will calculate the taxes you owe, and you can pay those taxes online by electronic payment. If you are reporting on paper, you are responsible for calculating your own taxes and submitting payment by mail.

You must file quarterly returns even if your business paid no wages. In such cases, you should enter “NONE” on your report. You can also file these so-called zero reports by phone—check with DEW for more details. You will be subject to a penalty if you fail to file.

Post a Notice (Poster)

You are required to post a notice (poster) regarding state unemployment claims (and other labor laws) in a conspicuous place for all employees. The poster provides basic information on how an employee can make a claim for unemployment benefits. You can download a notice from a page on the DEW website.

Do Not Misclassify Employees as Independent Contractors

Employers who use independent contractors rather than hiring employees are not subject to the UI tax. However, it’s important that you do not misclassify an employee as an independent contractor. If you do misclassify an employee, you could be subject to penalties or fines.

Using Payroll Service Companies

You may decide that it’s easiest to hand over responsibility for payroll, including UI taxes, to an outside payroll service. If so, keep in mind that your business, or even you personally, may still be held directly responsible for mistakes made by an outside payroll company.

Additional Information

This article touches on only the most basic elements of South Carolina UI taxes. Avoid possible penalties for making mistakes by checking both the IRS and DEW websites for the latest information. DEW also publishes an Employer Handbook that you can download from the Employer Resources section of the DEW website. In addition to state UI tax, employers have other responsibilities not covered in this article such as federal UI tax, state and federal withholding taxes, and required reporting of new hires. You can get more information about other small business tax issues in other articles here on Nolo.com.

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